A Strategy for Competition and Cooperation

CHAPTER 9

Chapter 9: A Strategy for Competition and Cooperation

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Organizing the U.S. Government to Tackle Emerging Technology Challenges

Create the Technology Competitiveness Council

Develop a National Technology Strategy

Establish High- Level U.S.-China S&T Dialogue

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The impact of artificial intelligence (AI) on the world will extend far beyond narrow national security applications. The development of AI constitutes a new pillar of strategic competition, and it heightens the competition in existing pillars. The nation with the most resilient and productive economic base will be best positioned to seize the mantle of world leadership. That base increasingly depends on the strength of the innovation economy, which in turn will depend on AI. AI technologies will drive waves of advancement in critical infrastructure, commerce, transportation, health, education, financial markets, food production, and environmental sustainability.

The race to research, develop, and deploy AI and associated technologies is already intensifying strategic competition. The U.S. government must embrace the AI competition and organize to win it. The American approach to innovation, which has served the country well for decades, must be recalibrated to account for the centrality of the competition involving AI and associated technologies to the emerging U.S.-China rivalry. To retain its innovation leadership and position in the world, the United States needs a stronger government-led technology strategy that integrates promotion and protection policies and links investments in AI to a larger constellation of related emerging technologies.1

“The race to research, develop and deploy AI and associated technologies is already intensifying strategic competition. The U.S. government must embrace the AI competition and organize to “win it.” p

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This chapter articulates the nature of the AI competition and the two prerequisites for winning it: organizing for technology competition under White House leadership and establishing the principles for continued cooperation with competitors. The following chapters (10–16) enumerate the core elements of an integrated strategy and prescribe actions to ensure the United States wins the AI competition and sets the foundation to win the broader technology competition. It is foremost an affirmative agenda for growing and recruiting talent, promoting a diverse AI innovation ecosystem, and investing in the R&D to harness AI and associated technologies to build a healthier, more prosperous, and secure society. Protection of research, intellectual property (IP), and investments will be necessary to complement the effort to invigorate AI competitiveness at home and build a coalition of like-minded partners in the world.

The United States Government must understand and define the technology competition, organize for it, and set the terms to engage with China.

Organizing for the Understanding the Competition Competition.

Establish a White House National Technology Competitiveness Council: Empower a single entity in the White House to set strategic direction and oversee a coordinated approach to technology competition. Made in China 2025 and AI World Leader 2030: Managing the Competition China has already Begin a U.S.-China developed a strategy Comprehensive S&T for technology Dialogue: Establish a high- leadership, picked key level dialogue with China technology sectors, to discuss challenges and started high-tech manage tensions related to projects within key emerging technologies (e.g. sectors, and delegated AI, quantum, biotech). authority across individual government agencies. Winning the Competition

Develop a National Technology Strategy: The Technology Competitiveness Council should develop a national strategy to guide U.S. policy across the constellation of emerging technologies starting with AI.

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The U.S.-China AI Competition Is Serious and Complex.

The leading indexes that measure progress in AI development generally place the United States ahead of China.2 However, the gap is closing quickly. China stands a reasonable chance of overtaking the United States as the leading center of AI innovation in the coming decade.3 In recent years, technology firms in China have produced pathfinding advances in natural language processing,4 facial recognition technology,5 and other AI-enabled domains. China’s businesses, investors, technologists, and academics are integral to global AI development. China’s social media and e-commerce companies compete for users around the world. Its telecoms build global 5G infrastructure. Its venture capitalists and large technology firms invest huge sums in new startups.6 Its leading AI companies have research labs in the United States7 and elsewhere.8 Its researchers produce a trove of respected AI papers that advance the field.9 None of this would concern us from a national security perspective, except for the fact that China is led by a single-party authoritarian regime that threatens American interests.

“China stands a reasonable chance of overtaking the United States as the leading center of AI innovation in the coming decade.”

China has moved more quickly and with more determination than the United States, guided by a constellation of AI plans for government ministries, universities, and companies.10 These strategic documents reflect Beijing’s view that advances in AI will fundamentally reshape military and economic competition in the coming decades.11 China has backed up its “strategic plans with significant state subsidies to technology firms and academic institutions that engage in cutting-edge AI research.12 China preserves its capital by taking advantage of basic research done by the West so that it can focus more on applications. It pours significant sums of money into research and talent in relevant fields,13 and it promotes “national champion” companies to win markets abroad.14 Through its military-civil fusion programs, China has sought to integrate advances in AI from the commercial and academic worlds into military power.15 Using espionage, technology transfer programs, and targeted investment, Beijing seeks to acquire sensitive IP and data from the United States and other countries.16

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The U.S.-China competition is complicated by the complex web of supply chains, research partnerships, and business relationships that link the world’s two AI leaders. Dramatic steps to sever these ties could be costly for Americans and reverberate across the world. The relationships between American and Chinese academics, innovators, and markets are deep, often mutually beneficial, and help advance the field of AI.17 Moreover, it remains in the U.S. national interest to leverage formal diplomatic dialogue about AI and other emerging technologies and to explore areas for cooperative AI projects that will benefit humanity.

“The United States can compete against China without ending collaborative AI research and severing all technology commerce.”

The United States can compete against China without ending collaborative AI research and severing all technology commerce. Broad-based technological decoupling with China could deprive U.S. universities and companies of scarce AI and science, technology, engineering, and mathematics (STEM) talent,18 sever American companies’ efficient supply chains,19 and “ 20 cut off access to markets and capital for innovative firms. Instead, the United States should conceive of targeted disentanglement as just one element of its overall approach, which, if applied judiciously to key sectors, can help build U.S. technological resilience, reduce threats from illicit technology transfer, and protect national security–critical sectors.

The Policy Challenges.

China’s competitive approach should not define the U.S. approach to innovation, but it does present an alternative model of AI development, frame the stakes of competition, and expose the sheer breadth of public policy choices the U.S. government must make to preserve American advantages.

The United States will need to reexamine its immigration policies to ensure that America wins the competition for AI talent. It will need to consider AI and broader STEM education initiatives through the lens of global competitiveness. It will have to consider how to diversify the AI research agenda and expand access to the data and tools necessary to

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conduct AI research in the face of costs for compute and data that are consolidating AI in fewer locations and shifting the balance from universities to the private sector. The United States will have to consider whether the long-standing approaches to IP are best suited to an era in which IP theft is pervasive and the U.S. IP regime has not yet fully accounted for AI and other emerging technologies. The United States will need to protect its leadership in the design of microelectronics, which may include encouraging the domestic reshoring of critical manufacturing on which our national security depends. And the United States will have to ensure that its tools and policies designed to prevent illicit technology transfer are postured to address the national security challenges presented by dual-use emerging technologies.

These AI-specific challenges, • How to draw on the best global in turn, expose even more talent without enabling damaging technology and knowledge transfer to fundamental questions competitors. spanning the technology, economic, and national security • How to foster an open collaborative research environment while closing spheres: licit and illicit loopholes exploited by foreign competitors. • How to compete with a rival without compromising U.S. values—including • How to sustain long-term strategies for free-market principles, individual R&D that are nevertheless responsive liberty, and limited government. to rapidly shifting geopolitical and technology developments. • How to ensure the proper balance between defense and economic • How to ensure the free flow of priorities. investment/capital without allowing strategic competitors to buy strategic • How to preserve hardware advantages advantage. without suffocating the domestic designers and producers that rely on • How to engage with our allies foreign competitors’ markets. and other partners to reduce their dependence on China’s digital • How to capitalize on and shape technologies, build more resilient private-sector developments for supply chains, and develop national security ends without stifling technology standards and norms that private sector-led and free-market reflect democratic values. innovation.

The Need for a Stronger Government Role in Technology Strategy.

The Commission is not calling for a state-directed economy, a five-year plan, or China- style “military-civil fusion.” It is instead urging a government-led process to restore a more balanced equilibrium between government, industry, and academia that ensures a

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diverse research environment, competitive economy, and the sustainment of a research agenda that supports the needs of the nation. The government has a long history of mobilizing industry and academia and making huge investments when the United States is challenged.21 Against the backdrop of a declared and committed competitor like China, and given AI’s transformative potential, the United States is confronting such a moment.

“... the U.S. government champions AI leadership in speeches and memorandums, but deploys few resources relative to commercial investment and historic funding benchmarks ...”

“Today, the U.S. government champions AI leadership in speeches and memorandums, but it deploys few resources relative to commercial investment and historic funding benchmarks and relies on a decentralized governance structure for achieving it.22 There is talk of a global talent competition, but in recent years the United States has tightened restrictions on visas for highly skilled workers,23 and U.S. students at the kindergarten to 12th grade (K-12) level have lagged behind East Asian and European competitors in exams designed to measure competency in STEM fields.24 Tech leaders and government officials talk about the importance of “public-private partnership,” but there is little action in either direction to deepen it in concrete ways. U.S. experts warn of the danger of AI being used for techno-authoritarian ends,25 but Washington has not led any new enduring coalition to create democratic alternatives. Current policies amount to a compilation of disparate AI-related activities underway in the federal government. Nowhere can one find a strategy coupled with the organization and resources to win an AI competition and preserve the United States’ AI leadership.

The government will have to orchestrate policies to promote innovation; protect industries and sectors critical to national security; recruit and train talent; incentivize domestic research, development, and production across a range of technologies deemed essential for national security and economic prosperity; and marshal coalitions of allies and

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partners to support democratic norms. Some elements of a national strategy will need to be coordinated and replicated at the state level, through state-specific strategies to support AI research, commerce, and education. This will require a complex sequencing of promotion and protection actions to minimize costs and risks of punitive actions; ensure basic and applied research agendas are mutually reinforcing; coordinate approaches with international partners; and align executive priorities with legislative powers. It will require identifying technology trends and assessing the relative strengths of the United States and its competitors. It will require, above all, strong and consistent White House leadership.

The Case for White House Leadership.

The government will require a center of power that can exert gravitational pull on domestic economic, national security, and science and technology policies. We have no such organization today. Several separate Executive Office of the President (EOP) entities possess some responsibility and capacity to fulfill the basic organizational requirements: the National Security Council (NSC),26 the Office of Science and Technology Policy (OSTP) 27 and its associated National Science and Technology Council (NSTC),28 and the National Economic Council (NEC).29 The Domestic Policy Council (DPC) also has critical related responsibilities and a similar mandate with leadership in the realm of immigration policy, education policy, and regulatory policy.30 An additional entity—the Office of Management and Budget (OMB)—oversees related budgets and government reform efforts.

In the absence of an overarching structure, it is left to the President and Vice President to identify, adjudicate, and reconcile the positions that emerge from parallel interagency processes, while leaving endless room for gadflies to run the gaps and influence the President. The President needs a tool to help decide and drive a new technology strategy down through the necessary but not sufficient existing councils and into the rest of the government. The White House should:

Technology Competitive Council.

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“The government will require a center of power that can exert gravitational pull on domestic economic, national security, and science and technology policies. We have no such organization today.”

“ Recommendation Create a Technology Competitiveness Council. The United States must strengthen executive leadership in technology policy in the White House by empowering a single entity to implement a comprehensive technology strategy. The Commission proposes creating a new Technology Competitiveness Council (TCC), which would include the same amalgamation of EOP leaders and Cabinet secretaries as other White House forums for convening the interagency, and be chaired by the Vice President with a newly appointed Assistant to the President for Technology Competitiveness serving as the day-to-day leader. The TCC would ensure that the gaps between NEC, OSTP, and NSC responsibilities are filled and linked to OMB. It would not replace the NSC, NEC, or OSTP-led NSTC structures, but would provide a forum for reconciling competing security, economic, and scientific priorities and elevate technology policy and concerns from a technical to a strategic level. To coordinate the council’s work, it is necessary to create a new principal, the Assistant to the President for Technology Competitiveness, responsible for ensuring policies pertaining to emerging technologies receive sufficient Presidential-level attention.

Develop a National Technology Strategy. The TCC should create a National Technology Recommendation Strategy, building on the elements we present here, which can guide U.S. policy across all key emerging technologies starting with AI. The goal of the National Technology Strategy should be to ensure long-term, overall U.S. leadership in technology, particularly emerging technologies critical to national security and competitiveness. The strategy should weigh the difficult tradeoffs between competing policy interests and priorities, identify critical technologies where competitors have sought to match or overtake U.S. leadership, and facilitate an integrated policy approach to emerging technologies. As a starting point, the strategy should build on the following pillars: 1) winning the AI talent competition; 2) promoting American AI innovation; 3) protecting U.S. AI advantages; and 4) leading a favorable international AI order.

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Recommendation Establish a high-level U.S.-China Comprehensive Science & Technology dialogue. The United States should establish a regular, high-level diplomatic dialogue with China that benefits the American people, remains faithful to our allies, and presses China to abide by international norms. The dialogue should focus on challenges presented by emerging technologies—to include AI, biotechnology, and other technologies as agreed by both sides. The dialogue should have two overarching objectives:

• Identify targeted areas of cooperation on emerging technologies to solve global challenges such as climate change and natural disaster relief; and

• Provide a forum to air a discrete set of concerns around specific uses of emerging technologies while building relationships and establishing processes between the two nations.

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Chapter 9 - Endnotes

1 While the U.S. government has released a number of documents emphasizing the importance of AI research and development—see, for example, President Trump’s executive order on AI—the U.S. lacks a comprehensive, whole-of-government plan to guide policymakers, researchers, and businesses toward a more secure U.S. future. Artificial Intelligence for the American People, The White House (last accessed Jan. 28, 2021), https://trumpwhitehouse.archives.gov/ai/.

2 See, e.g., Alexandra Mousavizadeh, et al., The Global AI Index, Tortoise Media (Dec. 3, 2019), https://www.tortoisemedia.com/2019/12/03/global-ai-index/; Jean François Gagné, et al., Global AI Talent Report 2020 (last accessed Dec. 29, 2020), https://jfgagne.ai/global-ai-talent-report-2020/; The Global AI Talent Tracker, MacroPolo (last accessed Dec. 29, 2020), https://macropolo.org/ digital-projects/the-global-ai-talent-tracker/; Jeffrey Ding, et al., MERICS Web Seminar: China as an AI Superpower? Quantifying China’s AI Progress Against the US and Europe, MERICS (July 1, 2020), https://merics.org/en/video/merics-web-seminar-china-ai-superpower-quantifying-chinas-ai-progress- against-us-and-europe.

3 Audrey Cher, ‘Superpower Marathon’: U.S. May Lead China in Tech Right Now—But Beijing Has the Strength to Catch Up, CNBC (May 17, 2020), https://www.cnbc.com/2020/05/18/us-china-tech-race- beijing-has-strength-to-catch-up-with-us-lead.html; Graham Allison & Eric Schmidt, Is China Beating the U.S. to AI Supremacy?, Belfer Center for Science and International Affairs (Aug. 2020), https:// www.belfercenter.org/publication/china-beating-us-ai-supremacy; Will Knight, China May Overtake the US with the Best AI Research in Just Two Years, MIT Technology Review (March 13, 2019), https://www.technologyreview.com/2019/03/13/136642/china-may-overtake-the-us-with-the-best-ai- research-in-just-two-years/.

4 Karen Hao, Three Charts Show How China’s AI Industry Is Propped Up by Three Companies, MIT Technology Review (Jan. 22, 2019), https://www.technologyreview.com/2019/01/22/137760/the-future- of-chinas-ai-industry-is-in-the-hands-of-just-three-companies/.

5 James Kynge & Nian Liu, From AI to Facial Recognition: How China Is Setting the Rules in New Tech, Financial Times (Oct. 7, 2020), https://www.ft.com/content/188d86df-6e82-47eb-a134-2e1e45c777b6.

6 Yusho Chao, Chinese Venture Capitalists Take a Shine to Startups Again, Nikkei (Sept. 13, 2020), https://asia.nikkei.com/Business/Finance/Chinese-venture-capitalists-take-a-shine-to-startups-again. See also, Visualizing Chinese Tech Giants Billion-dollar Acquisitions, CB Insights (May 28, 2020), https://www.cbinsights.com/research/bat-billion-dollar-acquisitions-infographic/.

7 See, e.g., A Chinese Tech Giant Is Setting Up an A.I. Research Lab on Amazon’s Home Turf, CNBC (May 2, 2017), https://www.cnbc.com/2017/05/02/tencent-ai-research-lab-seattle.html.

8 See, e.g., Saheli Roy Choudhury, Alibaba Sets Up Joint A.I. Research Center Outside China to Focus on AI, CNBC (Feb. 28, 2018), https://www.cnbc.com/2018/02/28/alibaba-sets-up-joint-a-i-research- lab-in-singapore.html.

9 In 2019, China had the largest number of submitted and accepted papers to the Association for the Advancement of AI (AAAI), one of the longest-running AI conferences. See Artificial Intelligence Index: 2019 Annual Report, Stanford Institute for Human-Centered AI at 41 (2019), https://hai.stanford. edu/sites/default/files/ai_index_2019_report.pdf. The Allen Institute for AI also predicts that China is poised to overtake the U.S. in the share of top-cited, breakthrough papers in AI by 2025. See Field Cady & Oren Etzioni, China May Overtake US in AI Research, Allen Institute for Artificial Intelligence (March 13, 2019), https://medium.com/ai2-blog/china-to-overtake-us-in-ai-research-8b6b1fe30595.

10 For a selection of such strategic documents, see AI Policy—China, Future of Life Institute (last accessed Dec. 30, 2020), https://futureoflife.org/ai-policy-china/; Graham Webster, et al., Full Translation: China’s ‘New Generation Artificial Intelligence Development Plan,’ New America (Aug. 1, 2017), https://www.newamerica.org/cybersecurity-initiative/digichina/blog/full-translation-chinas-new- generation-artificial-intelligence-development-plan-2017/ (translating China’s State Council Notice on the Issuance of the New Generation Artificial Intelligence Development Plan, dated July 20, 2017).

11 Gregory C. Allen, Understanding China’s AI Strategy, Center for a New American Security (Feb. 6, 2019), https://www.cnas.org/publications/reports/understanding-chinas-ai-strategy.

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Chapter 9 - Endnotes

12 Ashwin Acharya & Zachary Arnold, Chinese Public AI R&D Spending: Provisional Findings, Center for Security and Emerging Technology (Dec. 2019), https://cset.georgetown.edu/wp-content/uploads/ Chinese-Public-AI-RD-Spending-Provisional-Findings-1.pdf; see also Emily Weinstein, Mapping China’s Sprawling Efforts to Recruit Scientists, Defense One (Nov. 30, 2020), https://www.defenseone. com/ideas/2020/11/mapping-chinas-sprawling-efforts-recruit-scientists/170373/; David Cyranoski, China Joins the Battle for AI Talent, Nature (Jan. 17, 2018), https://www.nature.com/articles/d41586- 018-00604-6.

13 Id.

14 U.S.-China Economic and Security Review Commission, Hearing on Technology, Trade, and Military-Civil Fusion: China’s Pursuit of Artificial Intelligence, New Materials, and New Energy at 46, 115-116 (June 7, 2019), https://www.uscc.gov/sites/default/files/2019-10/June%207,%202019%20 Hearing%20Transcript.pdf.

15 U.S.-China Economic and Security Review Commission, Hearing on Technology, Trade, and Military-Civil Fusion: China’s Pursuit of Artificial Intelligence, New Materials, and New Energy (June 7, 2019), https://www.uscc.gov/sites/default/files/2019-10/June%207,%202019%20Hearing%20 Transcript.pdf.

16 Id.

17 As Eric Schmidt noted in Building a New Technological Relationship and Rivalry. See Hal Brands & Francis J. Gavin, COVID-19 and World Order: The Future of Conflict, Competition, and Cooperation, Johns Hopkins University Press at 406-418 (Aug. 31, 2020), https://muse.jhu.edu/chapter/2696578.

18 Ishan Banerjee & Matt Sheehan, America’s Got AI Talent: US’ Big Lead in AI Research Is Built on Importing Researchers, MacroPolo (June 9, 2020), https://macropolo.org/americas-got-ai-talent-us- big-lead-in-ai-research-is-built-on-importing-researchers/?rp=m.

19 U.S. Dependence on China’s Rare Earth: Trade War Vulnerability, Reuters (June 27, 2019), https:// www.reuters.com/article/us-usa-trade-china-rareearth-explainer/u-s-dependence-on-chinas-rareearth-trade-war-vulnerability-idUSKCN1TS3AQ.

20 Member Survey, US-China Business Council (Aug. 2019), https://www.uschina.org/sites/default/ files/member_survey_2019_-_en_0.pdf.

21 For instance, adjusted for inflation, the Manhattan Project cost an estimated $27 billion and the Apollo program totaled roughly $121 billion. Deborah Stine, The Manhattan Project, the Apollo Program, and Federal Energy Technology R&D Programs: A Comparative Analysis, Congressional Research Service (June 30, 2009), https://fas.org/sgp/crs/misc/RL34645.pdf (conversion into 2020 dollars was calculated using the U.S. Bureau of Labor Statistics’ CPI Inflation Calculator, available at https://www.bls.gov/data/inflation_calculator.htm).

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22 In 2018, U.S. federal R&D funding amounted to 0.7% of GDP, down from its peak at above 2% in the 1970s. See James Manyika & William H. McRaven, Innovation and National Security: Keeping Our Edge, Council on Foreign Relations (Sept. 2019), https://www.cfr.org/report/keeping-our-edge/ recommendations/.

23 Zolan Kanno-Youngs & Miriam Jordan, Trump Moves to Tighten Visa Access for High-Skilled Foreign Workers, New York Times (Oct. 6, 2020), https://www.nytimes.com/2020/10/06/us/politics/h1b-visas- foreign-workers-trump.html.

24 Moriah Balingit & Andrew Van Dam, U.S. Students Continue to Lag Behind Peers in East Asia and Europe in Reading, Math and Science, Exams Show, Washington Post (Dec. 3, 2019), https:// www.washingtonpost.com/local/education/us-students-continue-to-lag-behind-peers-in-east-asia- and-europe-in-reading-math-and-science-exams-show/2019/12/02/e9e3b37c-153d-11ea-9110- 3b34ce1d92b1_story.html.

25 Alina Polyakova & Chris Meserole, Exporting Digital Authoritarianism, Brookings (Aug. 2019), https:// www.brookings.edu/research/exporting-digital-authoritarianism/.

26 The National Security Council has a statutory mandate to “advise the President with respect to the integration of domestic, foreign, and military policies relating to the national security so as to enable the Armed Forces and the other departments and agencies of the United States Government to cooperate more effectively in matters involving the national security.” 50 U.S.C. § 3021(b)(1).

27 See Pub. L. 94-282, National Science and Technology Policy, Organization, and Priorities Act of 1976, 90 Stat. 459 (1976), https://obamawhitehouse.archives.gov/sites/default/files/microsites/ostp/ ostp_organic_statute.pdf.

28 The function of the NSTC under the supervision of the Director of OSTP is: “(1) to coordinate the science and technology policy-making process; (2) to ensure science and technology policy decisions and programs are consistent with the President’s stated goals; (3) to help integrate the President’s science and technology policy agenda across the Federal Government; (4) to ensure science and technology are considered in development and implementation of Federal policies and programs; and (5) to further international cooperation in science and technology. The Assistant may take such actions, including drafting a Charter, as may be necessary or appropriate to implement such functions.” William J. Clinton, Executive Order 12881: Establishment of the National Science and Technology Council (Nov. 23, 1993), https://www.govinfo.gov/content/pkg/WCPD-1993-11-29/pdf/ WCPD-1993-11-29-Pg2450.pdf.

29 William J. Clinton, Executive Order 12835: Establishment of the National Economic Council (Jan. 25, 1993), https://www.govinfo.gov/content/pkg/WCPD-1993-02-01/pdf/WCPD-1993-02-01-Pg95.pdf.

30 William J. Clinton, Executive Order 12859: Establishment of the Domestic Policy Council (Aug. 16, 1993), https://www.archives.gov/files/federal-register/executive-orders/pdf/12859.pdf.

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